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Nursing home bills, Medicaid, and life insurance

I live in Pennsylvania. I have about $30,000 in whole life insurance policies, 69, and currently healthy. Later, if I am in a nursing home over 100 days and go on Medicaid to pay for it, will they make me cash in my life insurance to pay for the nursing home bill? I am worried that they can take the money and leave my sons with the funeral expenses. Some say they can't take the money for the funeral home, others say they can.
Status: Open    Oct 19, 2016 - 09:28 AM

Medicare/Medicaid, Finance

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Expert Answers

Nov 02, 2016 - 09:19 AM

You are correct. Life insurance is a countable asset at face value. Your alternative is to convert to a paid-up policy and irrevocably assign to the funeral home of your choice or you can get the cash value and prepay for your burial needs including headstone, plot, etc. Most states have a $5,000 limit but that does not include merchandise such as casket, flowers, vault, etc. Your sons could wait until the need arises to do this but you may not be able to spend all $30,000 on a funeral. If the policies are paid-up (you are no longer paying a premium) you can transfer ownership to your sons. This would have to be done 5 years prior to your nursing home admission or application for benefits.
This is a good time to seek the assistance of an estate planning attorney to review your assets, ownership, beneficiaries, etc.

Nov 02, 2016 - 12:04 PM

You may qualify, if and when the time comes to stay in a nursing home past the 100 days payment from Medicare, for what's known as a life settlement. Third party investors will pay a sum of cash that is generally 3-5 times what the insurance carrier would offer when surrendered. They become the new owner and beneficiary of the policies. The cash paid to you (or the nursing home) would allow you to remain private pay for a longer time in the facility or home care agency of your choice. Typically $5000.00 is reserved for funeral expenses. Since you are still young and healthy, hold on to this policy. It could be an asset for a life settlement at a future time should you need lifecare. If no nursing home, then of course you hold on to the life policy and the death proceeds go to the named beneficiaries.

Nov 10, 2016 - 08:45 AM

Medicaid does count the cash value of any life insurance with a face value of over $1500. Depending on how much the cash value is you may want to cash it in and purchase an irrevocable prepaid funeral contract, or borrow against it to do the same.
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